The Dollars and Sense of RTW Programs

According to one study on worker absenteeism, the costs of a worker who is out of work for 2 weeks costs their employer 133% of his/her wages.  So, if an employee earns $500 per week, it will cost the employer $665 per week, or an extra $330 over a two week period. 

Various studies have been conducted on the cost-benefit and ROI of RTW programs.  In an article from the American Society of Safety Engineers, RTW programs can return $8 to $10 dollars for every $1 invested in a RTW program. 

In the same article, the authors cite another study which found that the direct costs associated with a WC claim (wage benefit payments, medical payments, and legal expenses) make up only 28% of the costs associated with WC claims.  The other 72% is comprised of indirect costs such as lost productivity, training, replacement worker costs, and other costs not covered by insurance.

A RTW program doesn’t have to cost you big bucks.  Many things can be done by making small changes.  When creating or identifying modified duty job opportunities, employers should look at the job tasks that other employees already perform.  This will help to ensure that the modified duty work is productive and serves a legitimate purpose, thereby helping reduce any costs associated with RTW.

The Mod Squad: RTW and Experience Modification Factors

We sat down with Karinda Greo, Eastern's Operations Analyst to discuss the intricacies of experience modification factors (herein known as EMF) to determine what impact RTW can have on an employer's EMF. 

If you're an Eastern client or agency partner who is interested in learning more about how you can control your EMF, register for our webinar, Experience Mod 101, that is set to take place on 3/27 @ 10 am!

Now, back to the interview...

What does the employer’s EMF represent?

The employer’s experience modification factor predicts, based on past experience, whether the employer is likely to develop loss experience that is better or worse than average. A period of 3 years of experience is considered, excluding the most recent policy term. For that time period, the employer’s claim data is compared to the average claim data for employers of similar operations and size. If the employer’s claim experience is worse than average, an EMF of greater than 1.0 is generated and acts as a surcharge to the workers compensation premium. If the employer’s claim experience is better than average, an EMF of less than 1.0 is applied to the premium and provides a discount. Keep in mind that since 3 years of experience is considered, each claim impacts the employer’s EMF for three consecutive years.

What impacts an employer’s EMF more: frequency or severity? 

In NCCI states, frequency definitely impacts an employer’s experience modification factor more than severity. The NCCI calculation uses a split point where all claim dollars below the split point are considered primary (frequency driven) and all claim dollars above the split point are considered excess (severity driven). The excess claim dollars are heavily discounted in the final calculation. Currently, the split point is transitioning from $5,000 to $15,000 over a 3 year period. Most states are around $10,000 today. Consider Employer A with one $40,000 claim; and Employer B with 4 claims at $10,000 each, totaling $40,000. Each has the same amount of total losses, but Employer A would have a lower EMF because the first $10,000 would be included at full weight, and the remaining $30,000 would be discounted as excess. Employer B would have a higher EMF because each claim would be counted as primary, resulting in $40,000 included at full weight in the calculation.

In PA and DE, the impact between frequency and severity is more even. Both states apply a cap instead of a split point. All claim dollars in excess of the cap are excluded entirely from the EMF calculation. The current cap for PA is $42,500, so the impact of highly severe claims is reduced. For example, if an employer has a $50,000 claim, only the first $42,500 is included in the EMF calculation. The remaining $7,500 is excluded. In the case of Employer A and Employer B described above, however, there would be no difference in the EMF as the full $40,000 would be included in the EMF calculation in both cases. The cap value for DE ranges from $31,000 to $470,000 and depends on the classification and size of the employer. The largest employers with the highest rated classifications will have the highest cap values.

How does the impact of lost time claims differ from medical only claims in the calculation of an employer's EMF?

In NCCI states, lost time claims have a much greater impact on the EMF than medical only claims. In fact, medical only claims are reduced by 70% in the NCCI calculation. For example, a $10,000 medical only claim counts as $3,000 in the EMF calculation. Lost time claims do not get discounted.

Vocational Rehabilitation, RTW and WC: What every employer should know

What is vocational rehabilitation (VR)?

According to IRMI:

"One aspect of the overall rehabilitation process that focuses on restoring an injured person's physical and mental capacity to perform work in a safe and productive manner. This process is normally geared to individuals whose disabilities permanently prevent them from returning to their prior positions without job modification and is normally overseen by a vocational counselor or therapist. For instances involving work-related injuries, the state workers compensation act establishes the type and range of services that must be provided the injured employee."

 

When is VR utilized?

The use of VR is typically triggered by an employer's inability or unwillingness to accommodate the IW's permanent restrictions.   

As with everything in WC, it is jurisdictionally specific.  Some states, like Minnesota, have regulations that require a vocational rehabilitation consultation if there's a reasonable expectation an IW will be totally disabled for more than 13 weeks.  Other states don't require vocational rehabilitation benefits but allow for them if an injured worker meets specified criteria, such as permanent disability.  

VR is sometimes used to rebut an opinion that an injured worker is permanently, totally disabled.  In other words, a VR specialist would identify jobs that the IW is capable of performing within his/her physical abilities and vocational skill set to disprove an opinion that the IW is incapable of earning any wages as a result of their injury.  The type of disability benefits an IW is receiving, as well as the duration for which they can receive them (total # of weeks) is governed by the state's WC law.  In some cases, converting an IW's benefits to a different status (temporary total to temporary partial) triggers a statutory cap, thereby limiting the amount/duration of benefits an IW is entitled to.

RTW and the Injured Worker -- It's all in their head!

Research demonstrates why we should be concerned about what the injured worker believes to be true regarding the outcome of their recovery.  When an injured worker is told, and believes, that they are going to return to their pre-injury duties, it is more likely that it will happen.  This obviously has to do with how accurate the doctor’s prognosis is, but also with how the injured worker aligns their behaviors with what they believe to be true.

Social psychology can help explain some of this.  The social psychological theory of confirmation bias posits that as humans, we will likely seek out information that supports our beliefs, and we will reject information that contradicts them.  If you hold a particular political view, you're likely going to be drawn to people, publications, and sources that support your views.  You will naturally reject ideas or points that are dissonant with your beliefs.  I, for one, will likely not search for articles that do not support RTW.

Another example is smoking.  Everyone seems to agree that it is not good for your health, but why do some highly intelligent, self-aware individuals continue to smoke?  They justify it in various ways, or reject information in an attempt to ease the dissonance between their actions and what they know.

In a 2002 study of 1566 injured workers who were receiving temporary total disability benefits, researchers found that workers' expectations about their recovery had a statistically significant impact on the duration of their disability.¹

When controlling for other suspected factors that could influence the injured workers' RTW, it was found that injured workers who felt their recovery would be slow or reported higher levels of uncertainty about the length of their disability were consistently associated with longer disability durations.  Conversely, workers who reported more positive expectations returned to work sooner. 

When measuring injured workers' recovery expectations, researchers found that 4 variables were able to explain 15.5% of the variance in the duration of receiving benefits. To put it another way, when a physician determines that an injured worker will recovery in x number of weeks, there is typically some variation between the prognosis (x) and the actual duration of disability.  If x is 10 weeks, and the injured worker actually returns in 13 weeks, 15.5% (or 1.5 days) of the 3 week variance can be attributed to the injured worker’s expectations about their ability to RTW.

So why is this study important?

·    Medical providers play an integral part of managing an injured worker's expectations about their ability to RTW.

·    Employers who offer modified duty can increase injured workers' self-efficacy by allowing them to prove that they are capable of doing more than what they initially thought.

·    Employers and medical providers must set realistic recovery expectations early in the recovery process. 

1. Cole, D. C., Mondloch, M. V., & Hogg-Johnson, S. (2002). Listening to injured workers:  How recovery expectations predict outcomes -- a prospective study. Canadian Medical Association Journal 166(6).